Vanguard Australian Shares ETF (ASX:VAS) plummets! What's going on?

The ASX's favourite index fund is down today while the market is up. What's the deal?

| More on:
A surprised man sits at his desk in his study staring at his computer screen with his hands up.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Vanguard Australian Shares ETF is a favourite for index investors
  • Yet today VAS units are down 2% while the markets are up
  • But could this have something to do with this ETF's latest dividend distribution?

The Vanguard Australian Shares Index ETF (ASX: VAS) unit price is seemingly plummeting today. VAS units closed at $97.21 each yesterday. But upon market open this morning, this popular ASX exchange-traded fund (ETF) opened at just $94.91 a unit. It's currently asking $95.08, down a nasty 2.2%.

And yet the S&P/ASX 300 Index (ASX: XKO) – the benchmark index that VAS tracks – is actually up by 0.1% today thus far. So what on earth is going on? Isn't VAS an index fund, designed to almost exactly mirror the ASX 300?

Well, yes. But today is an exception. The Vanguard Australian Shares ETF is not falling due to some strange decoupling from its index. Rather, it is falling because this ASX ETF has just traded ex-dividend distribution for its upcoming investor payment.

VAS price falls, but thank the dividend distribution

Yes, VAS pays dividends, although they come in the form of dividend distributions due to its ETF nature. The ASX 300 is an index comprised of the 300 largest companies on the ASX by market capitalisation. That means everything from Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW) to Harvey Norman Holdings Limited (ASX: HVN) and Ampol Ltd (ASX: ALD).

Since this ETF holds all 300 or so companies in the ASX 300 Index in its underlying portfolio, it receives dividends from any companies in the index that pay them. In the ASX 300's case, that is most of them, at least when it comes to the larger holdings.

So VAS is obligated to pass these dividends on to its investors. Vanguard does this every quarter, so investors can expect a dividend distribution every three months or so.

This is what is occurring today. VAS's upcoming distribution, covering the quarter ended 31 March 2021, has just traded ex-distribution, meaning that any new investors from today won't receive the next payment. This is due to be doled out on 20 April. This payment will be worth 199.8517 cents per unit.

This payment brings VAS's trailing 12-month distributions to $4.66 per unit. On current pricing, that gives the Vanguard Australian Shares Index ETF a trailing yield of 4.9%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ETFs

The letters ETF on wooden cubes with golden coins on top of the cubes and on the ground
Defensive Shares

Bolster your ASX stock portfolio with these two defensive ETFs

These ETFs can help you sleep at night...

Read more »

A crown sits on a pile of money, indicating the richest people
ETFs

5 ASX ETFs that are fit for a king

These funds could be top picks for investors after the King's Birthday public holiday.

Read more »

A young well-dressed couple at a luxury resort celebrate successful life choices.
ETFs

Buy and hold these fantastic ASX ETFs until 2035

Let's see why these funds could be long term wealth generators.

Read more »

ETF in written in different colours with different colour arrows pointing to it.
ETFs

Invest $1,000 into these world-class ASX ETFs

What makes these funds top options? Let's find out.

Read more »

ETF written on cubes sitting on piles of coins.
ETFs

$10,000 invested in ASIA ETF a year ago is now worth…

Betashares Asia Technology Tigers ETF provides appealing geographic diversification beyond the US.

Read more »

Concept image of a finger hovering in front of a buy and sell button in front og a stockmarket graphic.
ETFs

Show no fear: ASX investors increasingly 'focused on opportunities' amid sharemarket volatility

Nabtrade's director of investor behaviour says there has been a change in mindset among Aussie investors.

Read more »

Father and daughter with hands on a small plant.
ETFs

Focused on growth? Here are 3 ASX ETFs to consider

Growth investors must ignore the current market noise about tariffs and focus on the long-term horizon.

Read more »

Happy young couple saving money in piggy bank.
ETFs

Buy these top ASX ETFs for a passive income boost

These funds could be worth a closer look if you are hunting income from the share market.

Read more »